ConocoPhillips demobilizes drill rig fleet to protect against virus

ConocoPhillips announced April 8 that it would shut down its entire North Slope rig fleet as a safety precaution amid the COVID-19 virus outbreak.

“Due to the heightened COVID-19 risk to our North Slope workforce, we are taking action to significantly reduce the number of personnel on the Slope in a managed fashion. To do this, we’ve made the decision to demobilize our rig fleet,” company spokeswoman Natalie Lowman said.

“The health and well-being of our workforce, along with mitigating the spread of COVID-19 is our top priority. The preventative actions we’re taking in Alaska are primarily due to the remoteness and complexity of operating on the North Slope during the COVID pandemic,” she said.

“Given the high degree of uncertainty on how the situation plays out, we can’t say how long these measures will be in place,” Lowman said. ConocoPhillips had said earlier that it would lay down two rigs working on development drilling in the Kuparuk River and Alpine fields due to low oil prices. BP has also announced that it would suspend operations of two drilling rigs in the Prudhoe Bay field.

ConocoPhillips did not indicate how many drill rigs would be affected but Lowman did say that Doyon Drilling Rig 26, a heavy-duty specialized rig designed for long “extended reach” horizontal wells that has just arrived on the slope, will be among the rigs laid down.

Doyon’s Rig 26 was to have started drilling Fiord West, an undeveloped oil deposit in the Alpine field. Had drilling stayed on schedule Fiord West would have started production later this year, providing new oil that would offset the natural decline of large, older fields on the slope.

Although the sharp drop in crude oil prices was not mentioned by ConocoPhillips, laying off drill rig is often one of the things that happens when prices drop because it is a quick way to reduce spending particularly when some producing wells, or even fields, are operating at break-even or even losing money.

On Thursday the state Department of Revenue announced a $9.88 per barrel drop in the price of Alaska North Slope oil, to a price of $18.21 per barrel. Since it costs, on average, about $10 per barrel to move oil from the slope to market, combining pipeline and tanker costs, this means that the “wellhead” value of the oil on the slope is $8.21 per barrel.

The decision to lay down rigs will put several hundred employees of drilling and service companies temporarily out of work. Drilling is one of the most labor-intensive operations in an oilfield in terms of skilled manpower required and support work, from provision of diesel and other fuel to chemicals used in drilling fluids.